News Archive January 2019

World Bank, BMZ announce enhanced collaboration on Africa development projects

World Bank Group and German Federal Ministry for Economic Cooperation and Development (BMZ) launch joint efforts in six countries

The World Bank Group and German Federal Ministry for Economic Cooperation & Development on 30 January 2019 announced a deeper partnership for economic development in six countries in Africa. BMZ will provide significant additional financial support through the partnership, which will harness World Bank Group expertise on the ground in order to catalyze investment, job creation and sustainable economic growth.

The partnership flows from a Joint Declaration of Intent between BMZ and the Bank Group signed at a G20 Africa Investment Summit in Berlin on October 30, 2018. It sets out parameters for joint action in Morocco and Tunisia in North Africa, and Côte d’Ivoire, Ethiopia, Ghana, and Senegal in Sub-Saharan Africa. The countries will benefit from joint financial support for technical assistance, development policy operations and other reform programs provided by the World Bank Group.

Included in the partnership is a time frame for joint missions to the six countries and guidance for potential reforms to increase private capital inflows and job creation. The sectors covered include renewable energy, power grid modernization, jobs and skills training, investment policy and land reform, and development of the automotive sector.

“Millions of young people will be entering the job market in Africa in the years ahead,” said World Bank Chief Executive Officer, Kristalina Georgieva. “Good policy reforms pay off by creating a dynamic business environment that can unleash the potential of the private sector. We are pleased to be working with the Government of Germany to step up our joint engagement on this important agenda.”

“Germany wants to see more investments and jobs in Africa and has identified reform countries under the G20 Compact with Africa Initiative,” said State Secretary in the German Ministry for Economic Cooperation and Development, Martin Jäger. “To make this happen we will forge a new type of partnership with the World Bank Group. In order to achieve quick and tangible results, we will work with the World Bank Group in a much more integrated way – regularly aligning our engagements with regard to policy reforms and concrete investments as well as technical assistance.”

The six countries have been selected by BMZ are participants in the G20 Compact with Africa, an initiative that was launched in 2017 under the German G20 Presidency. The Compact with Africa brings together G20 members with 12 countries in Africa, with the support of the World Bank Group, International Monetary Fund, and African Development Bank.

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tralac’s Daily News Selection

Featured commentary, Célestin Monga (Project Syndicate): Reaping the benefits of African economic integration

East Africa’s private sector seeks larger role in resolving EAC challenges (Daily News)

As the East African region braces for the EAC Heads of State Summit this Friday, the region’s private sector has asked for deeper engagement in resolving economic challenges facing the bloc. In a telephone interview with ‘Daily News’ yesterday, East African Business Council executive director, Mr Peter Mathuki observed that issues like the removal of non-tariff barriers, ease of doing business and trade facilitation will only be resolved if the private sector gets fully engaged in matters of integration. “The private sector needs to be fully involved in its entirety in integration issues; we no longer want to be mere observers but actors in this matter.”

An interview with the EABC’s Peter Mathuki: Our new models will help regional businesses grow their networks (The East African)

The EABC will also take a lead role in the African Continental Free Trade Area with an eye to opening up new markets for businesses. The council will mobilise the private sector to support partner states in endorsing the agreement. The EABC hopes to expand its membership base: currently, we have around 150 members. We are looking to raise that number to 500. We will divide the EABC into five departments in order to strengthen it: The service department, which will tackle tourism, airspace and telecommunication; manufacturing; agriculture; energy and infrastructure department to support growth and trade facilitation; and the SMEs department, to attract small and medium players to join the Council. [Rwanda, Burundi frosty ties to feature in summit]

Zimbabwe’s trade deficit hits $2,4bn (The Herald)

Zimbabwe’s trade deficit for the 11 months to December 2018 stood at $2,4bn, as the value of imports continued to outstrip value of exports, mostly unprocessed raw materials. Figures from the Zimbabwe national Statistics Agency, show that Zimbabwe imported goods worth $6,3bn between February and December 2018, from $4,9bn recorded during the same period the prior year. This was against exports that came in at $3,9bn, representing an increase of 14% from the $3,4bn worth of exports recorded in 2017. However, the growth was not enough to offset the ballooning import bill. According to Zimstats, South Africa remained Zimbabwe’s top trading partner accounting for the biggest chunk of both imports and exports while Mozambique, China, United Arab Emirates and Zambia have also remained Zimbabwe’s top trade partners.

Zambia: Modernising licensing for customs clearing agents (Global Alliance for Trade Facilitation)

Customs clearing agents in Zambia are to be offered accredited training as part of a new trade facilitation project being launched today by the Zambia Revenue Authority and the Global Alliance for Trade Facilitation. Over the next two years the project will see the ZRA, customs clearing agents associations, training institutions and local and international businesses that trade in Zambia work together to design and introduce a new framework for licensing customs clearing agents. Customs clearing agents will be able to access a professional course delivered by qualified trainers, combining practical, hands-on training with e-learning. They will then sit an exam, allowing them to demonstrate their competence in applying ZRA regulations and the Harmonized Tariff Schedule. The project is the result of several months of collaboration between the ZRA and the private sector to identify the challenges faced by traders moving goods across Zambia’s borders. It will support Zambia’s plans to implement the World Trade Organization’s Trade Facilitation Agreement and increase the competitiveness of Zambian industry. The project in Zambia becomes the ninth in the Alliance’s portfolio of work to support developing and least developed countries implement the TFA through the public and private sectors working together.

The State of Small Business in South Africa (TIPS)

How many small business are there? As Graph 1 shows, the number of formal small business reported in the labour market surveys climbed from around 600 000 in 2010 to 2012 to 640 000 in 2017. The number of informal business grew from 1,3 million to 1,5 million in the same period. Small business by sector. According to the Labour Force Survey, the distribution of small business between industries was stable over the past decade. In 2017, a quarter of formal small businesses were in business services, with almost as many in trade. A seventh each was in construction and personal services. In the services sectors, around a quarter of small formal businesses were in cleaning and security, with professional services such as law firms and healthcare accounting for most of the rest. Just under a tenth of formal small enterprises were in manufacturing, with over a quarter in metals and machinery, followed at a distance by food processing, wood and printing. Half of all informal businesses were in trade, a seventh in construction and another seventh in personal services. The main services for informal enterprises were cleaning and security. Just under a tenth of informal businesses were in manufacturing, largely clothing followed by metals. [Related: World Bank on its growth forecasts for South Africa: Better to err on the side of caution; Public-Private Growth Initiative believes high-growth South Africa is within reach]

Global seed firms reach only 10% of world’s small farmers (EABW)

Global seed companies are adapting their products to combat the impact of climate change and address nutrition needs. But limited access to quality seed in many emerging economies persists, with the global seed industry reaching just 10% of the world’s smallholder farmers, according to a new study. The Access to Seeds Index 2019 – Global Seed Companies, published by the Amsterdam-based Access to Seeds Foundation, evaluates the activities of the 13 leading global seed companies to shine a light on where the industry can do more to raise smallholder farmer productivity, improve nutrition and mitigate the effects of climate change through the development and dissemination of quality seed. The research shows that sales by the 13 global seed companies only reached around 47 million of the world’s 500 million smallholder farmers in 2017, and most investment went to a small number of countries, mostly in South and Southeast Asia. In these regions, global companies invest heavily in local seed business activities: 12 of them in breeding and 12 in production. In contrast, such activities are rare in Western and Central Africa, with only two companies investing in local breeding and one in production.

Trade misinvoicing undermines the impact of international trade in developing nations (GFI)

A new analysis of illicit financial flows due to trade misinvoicing in 148 developing countries demonstrates that trade-related IFFs appear to be both significant and persistent features of developing country trade with advanced economies. As such, trade misinvoicing remains an obstacle to achieving sustainable and equitable growth in the developing world. This update, pdf Illicit Financial Flows to and from 148 Developing Countries: 2006-2015 (1.15 MB) , is the latest in a series of Global Financial Integrity reports which provide country-level estimates of the illicit flows of money into and out of 148 developing and emerging market nations as a result of their trade in goods with advanced economies. Increasing trade among developing and emerging market countries is seen by many economists as a primary path to greater development. However, high levels of misinvoicing, as a percentage of total trade, indicate that most developing country governments do not benefit from a significant portion of their international trade transactions with advanced economies. Highlights of GFI’s research for 2015 (the most recent year for which there is usable data) show that:

Corruption Perceptions Index: Sub-Saharan Africa (TI)

This year’s Corruption Perceptions Index (CPI) presents a largely gloomy picture for Africa – only eight of 49 countries score more than 43 out of 100 on the index. Despite commitments from African leaders in declaring 2018 as the African Year of Anti-Corruption, this has yet to translate into concrete progress. Seychelles scores 66 out of 100, to put it at the top of the region. Seychelles is followed by Botswana and Cabo Verde, with scores of 61 and 57 respectively. At the very bottom of the index for the seventh year in a row, Somalia scores 10 points, followed by South Sudan (13) to round out the lowest scores in the region. Notwithstanding Sub-Saharan Africa’s overall poor performance, there are a few countries that push back against corruption, and with notable progress.

Two countries – Côte d’Ivoire and Senegal – are, for the second year in a row, among the significant improvers on the CPI. In the last six years, Côte d’Ivoire moved from 27 points in 2013 to 35 points in 2018, while Senegal moved from 36 points in 2012 to 45 points in 2018. These gains may be attributed to the positive consequences of legal, policy and institutional reforms undertaken in both countries as well as political will in the fight against corruption demonstrated by their respective leaders. With a score of 37, Gambia improved seven points since last year, while Seychelles improved six points, with a score of 66. Eritrea also gained four points, scoring 24 in 2018. In Gambia and Eritrea, political commitment combined with laws, institutions and implementation help with controlling corruption. In the last few years, several countries experienced sharp declines in their CPI scores, including Burundi, Congo, Mozambique, Liberia and Ghana. [A DW interview with Samuel Kaninda: Transparency International’s coordinator for West Africa]

Today’s Quick Links:

EU market opens up for Kenyan sweet potato farmers

Ethiopia-Djibouti Transport Corridor Project Phase I: Environmental and social impact assessment summary, Resettlement Action Plan summary

Tanzania: TANESCO at centre of efforts to spread power supply across Africa

Uganda, Tanzania edge closer to constructing oil pipeline

AU-ILO-IOM-ECA hold steering committee meeting on labour migration

SAIIA G20 Africa Conference: Navigating African Priorities for the G20

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tralac’s Daily News Selection

30 Jan 2019
Featured commentary, Célestin Monga (Project Syndicate): Reaping the benefits of African economic integration East Africa’s private sector seeks larger role in resolving EAC challenges (Daily News) As the East African region...
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2018 Corruption Perceptions Index: Undemocratic regimes undermine anti-corruption efforts in sub-Saharan Africa

The 2018 Corruption Perceptions Index (CPI), released on 29 January 2019 by Transparency International, reveals that the continued failure of most countries to significantly control corruption is contributing to a crisis of democracy around the world.

“With many democratic institutions under threat across the globe – often by leaders with authoritarian or populist tendencies – we need to do more to strengthen checks and balances and protect citizens’ rights,” said Patricia Moreira, Managing Director of Transparency International. “Corruption chips away at democracy to produce a vicious cycle, where corruption undermines democratic institutions and, in turn, weak institutions are less able to control corruption.”

The 2018 CPI draws on 13 surveys and expert assessments to measure public sector corruption in 180 countries and territories, giving each a score from zero (highly corrupt) to 100 (very clean).

CPI highlights

More than two-thirds of countries score below 50, with an average score of only 43. Since 2012, only 20 countries have significantly improved their scores, including Estonia and Côte D’Ivoire, and 16 have significantly declined, including, Australia, Chile and Malta.

Denmark and New Zealand top the Index with 88 and 87 points, respectively. Somalia, South Sudan, and Syria are at the bottom of the index, with 10, 13 and 13 points, respectively. The highest scoring region is Western Europe and the European Union, with an average score of 66, while the lowest scoring regions are Sub-Saharan Africa (average score 32) and Eastern Europe and Central Asia (average score 35).

“Our research makes a clear link between having a healthy democracy and successfully fighting public sector corruption,” said Delia Ferreira Rubio, Chair of Transparency International. “Corruption is much more likely to flourish where democratic foundations are weak and, as we have seen in many countries, where undemocratic and populist politicians can use it to their advantage.”

To make real progress against corruption and strengthen democracy around the world, Transparency International calls on all governments to:

  • strengthen the institutions responsible for maintaining checks and balances over political power, and ensure their ability to operate without intimidation;

  • close the implementation gap between anti-corruption legislation, practice and enforcement;

  • support civil society organisations which enhance political engagement and public oversight over government spending, particularly at the local level;

  • support a free and independent media, and ensure the safety of journalists and their ability to work without intimidation or harassment.


Sub-Saharan Africa: A continuous struggle in fighting corruption across the region

This year’s Corruption Perceptions Index (CPI) presents a largely gloomy picture for Africa – only eight of 49 countries score more than 43 out of 100 on the index. Despite commitments from African leaders in declaring 2018 as the African Year of Anti-Corruption, this has yet to translate into concrete progress.

Seychelles scores 66 out of 100, to put it at the top of the region. Seychelles is followed by Botswana and Cabo Verde, with scores of 61 and 57 respectively.

At the very bottom of the index for the seventh year in a row, Somalia scores 10 points, followed by South Sudan (13) to round out the lowest scores in the region.

With an average score of just 32, Sub-Saharan Africa is the lowest scoring region on the index, followed closely by Eastern Europe and Central Asia, with an average score of 35.

Corruption and a crisis of democracy

Sub-Saharan Africa remains a region of stark political and socio-economic contrasts and many longstanding challenges. While a large number of countries have adopted democratic principles of governance, several are still governed by authoritarian and semi-authoritarian leaders. Autocratic regimes, civil strife, weak institutions and unresponsive political systems continue to undermine anti-corruption efforts. 

Countries like Seychelles and Botswana, which score higher on the CPI than other countries in the region, have a few attributes in common. Both have relatively well-functioning democratic and governance systems, which help contribute to their scores. However, these countries are the exception rather than the norm in a region where most democratic principles are at risk and corruption is high.

Improvers

Notwithstanding Sub-Saharan Africa’s overall poor performance, there are a few countries that push back against corruption, and with notable progress.

Two countries – Côte d’Ivoire and Senegal – are, for the second year in a row, among the significant improvers on the CPI. In the last six years, Côte d’Ivoire moved from 27 points in 2013 to 35 points in 2018, while Senegal moved from 36 points in 2012 to 45 points in 2018. These gains may be attributed to the positive consequences of legal, policy and institutional reforms undertaken in both countries as well as political will in the fight against corruption demonstrated by their respective leaders.

With a score of 37, Gambia improved seven points since last year, while Seychelles improved six points, with a score of 66. Eritrea also gained four points, scoring 24 in 2018. In Gambia and Eritrea, political commitment combined with laws, institutions and implementation help with controlling corruption.

Decliners

In the last few years, several countries experienced sharp declines in their CPI scores, including Burundi, Congo, Mozambique, Liberia and Ghana.

In the last seven years, Mozambique dropped 8 points, moving from 31 in 2012 to 23 in 2018. An increase in abductions and attacks on political analysts and investigative journalists creates a culture of fear, which is detrimental to fighting corruption.

Home to one of Africa’s biggest corruption scandals, Mozambique recently faced indictments of several of its former government officials by US officials. Former finance minister and Credit Suisse banker, Manuel Chang, is charged with concealing more than US$2 billion dollars of hidden loans and bribes.

Many low performing countries have several commonalties, including few political rights, limited press freedoms and a weak rule of law. In these countries, laws often go unenforced and institutions are poorly resourced with little ability to handle corruption complaints. In addition, internal conflict and unstable governance structures contribute to high rates of corruption.

Countries to watch

Angola, Nigeria, Botswana, South Africa and Kenya are all important countries to watch, given some promising political developments. The real test will be whether these new administrations will follow through on their anti-corruption commitments moving forward.

With a score of 27, Nigeria remained unchanged on the CPI since 2017. Corruption was one of the biggest topics leading up to the 2015 election and it is expected to remain high on the agenda as the country prepares for this year’s presidential election taking place in February.

Nigeria’s Buhari administration took a number of positive steps in the past three years, including the establishment of a presidential advisory committee against corruption, the improvement of the anti-corruption legal and policy framework in areas like public procurement and asset declaration, and the development of a national anti-corruption strategy, among others. However, these efforts have clearly not yielded the desired results. At least, not yet.

With a score of 19, Angola increased four points since 2015. President Joao Lourenco has been championing reforms and tackling corruption since he took office in 2017, firing over 60 government officials, including Isabel Dos Santos, the daughter of his predecessor, Eduardo Dos Santos. Recently, the former president’s son, Jose Filomeno dos Santos, was charged with making a fraudulent US$500 million transaction from Angola's sovereign wealth fund. However, the problem of corruption in Angolan goes far beyond the dos Santos family. It is very important that the current leadership shows consistency in the fight against corruption in Angola.

With a score of 43, South Africa remains unchanged on the CPI since 2017. Under President Ramaphosa, the administration has taken additional steps to address anti-corruption on a national level, including through the work of the Anti-Corruption Inter-Ministerial Committee. Although the National Anti-Corruption Strategy (NACS) has been in place for years, the current government continues to build momentum for the strategy by soliciting public input.

In addition, citizen engagement on social media and various commissions of inquiry into corruption abuses are positive steps in South Africa. The first commission of inquiry, the Zondo Commission, focuses on state capture, while the second focuses on tax administration and governance of the South African Revenue Service (SARS). Given that previous commissions of inquiry produced few results, the jury is still out on whether the new administration will yield more positive change.

Another example of recent anti-corruption efforts in South Africa is the Special Investigating Unit (SIU) report on corruption in the Gauteng Department of Health. While the report never saw the light of day under previous administrations, under President Ramaphosa it exposed several high profile individuals, including members of the ruling party.

In both Kenya and South Africa, citizen engagement in the fight against corruption is crucial. For example, social media has played a big role in driving public conversation around corruption. The rise of mobile technology means ordinary citizens in many countries now have instant access to information, and an ability to voice their opinions in a way that previous generations did not. 

In addition to improved access to information, which is critical to the fight against corruption, government officials in Kenya and South Africa are also reaching to social media to engage with the public. Corruption Watch, our chapter in South Africa, has seen a rise in the number of people reporting corruption on Facebook and WhatsApp. However, it remains to be seen whether social media and other new technologies will spur those in power into action.

Recommendations

  • Governments in Sub-Saharan Africa must intensify their efforts and keep in mind the following issues, when tackling corruption in their countries:

  • Demonstrate visible commitment to anti-corruption from political leaders, notably in Burundi, Congo and Mozambique.

  • Protect human rights defenders, political analysts, anti-corruption activists and investigative journalists and enable them to speak out on corruption issues.

  • Improve the health of democratic institutions. This includes supporting participation, transparency and trust, along with necessary checks and balances.

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Illicit financial flows are significant and persistent drag on developing country economies

Trade misinvoicing undermines the impact of international trade in developing nations

A new analysis of illicit financial flows (IFFs) due to trade misinvoicing in 148 developing countries demonstrates that trade-related IFFs appear to be both significant and persistent features of developing country trade with advanced economies. As such, trade misinvoicing remains an obstacle to achieving sustainable and equitable growth in the developing world.

This update, titled Illicit Financial Flows to and from 148 Developing Countries: 2006-2015, is the latest in a series of Global Financial Integrity (GFI) reports which provide country-level estimates of the illicit flows of money into and out of 148 developing and emerging market nations as a result of their trade in goods with advanced economies.

IFFs are defined as money that is illegally earned, used or moved and which crosses an international border. Trade misinvoicing is a method of moving IFFs, and includes the deliberate misrepresentation of the value of imports or exports in order to evade customs duties and VAT taxes, launder the proceeds of criminal activity or to hide offshore the proceeds of legitimate trade transactions, among other motivations.

Increasing trade among developing and emerging market countries is seen by many economists as a primary path to greater development. However, high levels of misinvoicing, as a percentage of total trade, indicate that most developing country governments do not benefit from a significant portion of their international trade transactions with advanced economies. Highlights of GFI’s research for 2015 (the most recent year for which there is usable data) show that:

  • On average, trade misinvoicing is equivalent to 18 percent of total trade with advanced economies among all developing countries.

  • Several nations have trade misinvoicing levels significantly higher than the global average including: Sierra Leone (39.8%), Georgia (34%), Botswana (31.8%), Maldives (29.6%), Ethiopia (29.3%), The Bahamas (29%) and Cameroon (26%).

  • On average, illicit inflows (53% of total) are greater than illicit outflows.

  • Countries with high dollar values of illicit inflows include: Indonesia ($10.1 billion), Romania ($6.8 billion), Chile ($3.2 billion), Colombia ($2.9 billion), Morocco ($2.7 billion) and Tunisia ($2.3 billion)

  • Nations with high dollar amounts of illicit outflows include: Mexico ($31.5 billion), Malaysia ($22.9 billion), Brazil ($12 billion), Vietnam ($9.1 billion), Hungary ($7.6 billion), South Africa ($5.9 billion), Algeria ($4.1 billion), Bangladesh ($2.7 billion) and Tunisia ($1.8 billion).

  • A different set of countries is produced when ranked by illicit outflows as a percentage of total trade with advanced economies, including Uganda (14.7%), Rwanda (13.7%), and Namibia (13.6%), as well as Costa Rica (12.5%), Colombia (12.1%) and Guatemala (11.9%).

In addition to updating the estimated IFFs GFI has presented in the past, this report widens the scope of its research and uses a more detailed database published by United Nations (UN) Comtrade along with updated measures from the International Monetary Fund (IMF) data it has used previously. This report presents estimates of IFFs based on both data sets.

While the Comtrade data set is more detailed, not all countries provide their trade data to the UN and therefore are not represented in this analysis. Many of the 44 nations that do not report trade transactions to the UN are small states, however a few non-reporting countries have substantial economies including Kenya, Nigeria and Venezuela. Trade-related illicit flows for these nations (and the other 41 countries not reporting to the UN) can be found in the report using the IMF’s Direction of Trade Statistics (DOTS) data set (see Appendix Table III-1).

Highlights of GFI research for the year 2015 using the DOTS dataset from the IMF shows that:

  • The top quintile (30) of countries, ranked by dollar value of illicit outflows, includes resource rich countries such as South Africa ($10.2 billion) and Nigeria ($8.3) but also European countries including Turkey ($8.4 billion), Hungary ($6.5 billion) and Poland ($3.1 billion) as well as Latin American nations Mexico ($42.9 billion), Brazil ($12.2 billion), Colombia ($7.4 billion) and Chile ($4.1 billion). Asian states in the top 30 countries of this category include Malaysia ($33.7 billion), India ($9.8 billion), Bangladesh ($5.9 billion) and the Philippines ($5.1 billion).

  • The top quintile (30) of countries, ranked by illicit outflows as a percentage of total trade with advanced economies, produces an entirely different group of countries including Mozambique (48.1%), Malawi (44.1%), Zambia (43%), Honduras (39.7%), Namibia (38.7%) and Myanmar (30.8%).

  • The list of top 30 countries ranked by dollar value of illicit inflows[1] include a regionally diverse group including Vietnam ($22.5 billion), Thailand ($20.9 billion), and Indonesia ($15.4 billion) as well as Latin American nations Panama ($18.3 billion) and Argentina ($4.8 billion). Additional countries include Kazakhstan ($16.5 billion), Belarus ($6.1 billion) and Morocco ($3.9 billion).


[1] Note: illicit inflows are a type of resource curse in that a) their origin is unknown, b) inflows are invisible to governments, c) they are not taxed, and d) they often times fuel illegal activities such as drug trafficking.

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